Occupy Wall Street

The top 1% in the United States currently pay about 1/3 of their income in taxes. As might be expected, people on the left have proposed increasing this tax rate. Laying aside ideological hyperbole, the serious proposals aim at setting the tax rate for the upper level at 40% and there has been some serious discussion of setting it as high as 45%.

While the current Democratic candidates for the 2016 Presidential race are willing to say they will raise taxes on the rich, the Republicans are consistently opposed to tax increases—most especially on the wealthy. Both parties are engaged in sensible politics in that they are saying what they think their base wants to hear. While the political value of each stance on taxing the rich is a matter worth considering, I will instead focus on an argument against increasing the taxes on the rich.

One reasonable approach to arguing against (or for) any tax increase is an appeal to fairness. This sort of reasoning rests on the assumption that fairness matter morally. If this assumption holds, then if something can be shown to be unfair, then that is moral strike against it. In contrast, showing that something is fair is to win a moral point in its favor.

The wealthy and their devoted defenders could argue that a tax increase to 40% (or higher) would be unfair. For example, Dr. Ben Carson has proposed what has become known as his “10% Flat Tax Plan”, although he did consider a rate of 10-15% (and possibly higher at the start of his plan). He considers this the fairest approach to taxation, in that he claims there is nothing fairer. While not everyone finds such a plan fair (or even workable), it is clear that it can be argued that any proposed tax increase for the rich would be unfair.

Since arguments are free, even the poor can avail themselves of the appeal to fairness. Back before Occupy Wall Street faded from the attention of the media and most Americans, there were many appeals to fairness aimed at the perceived unfairness of the economic system of the United States. This movement did have some lasting impact in that it introduced the 1% and the 99% into American political discourse.

Interestingly enough, this talk of the 99% and the “#iamthe99” inspired Erik Erickson to try to create a counter meme of “#iamthe53.” This is in reference to his claim that 53% of Americans pay federal income tax. He contended that people should stop complaining, stop blaming Wall Street and pay their taxes. In response to the criticisms of the Occupiers, Erickson made an appeal to the old saying that life is not fair:

Well, these people apparently forgot that life is not fair and are demanding the government intervene to legislate that life suddenly become fair. They are claiming to be the “99%” against the evil 1% of rich people who work on Wall Street. They are posting pictures to a website holding up their sob stories. Some are terribly tragic, but most? Boo-freakin’-hoo. Life is not, never has been, and never will be fair.

This can be seen as something of an evil twin to the appeal to fairness. Under the rhetoric, this sort of argument rests (obviously) on the assumption that life is not fair. When a complaint about unfairness is raised, it is countered by the assertion that this unfairness is acceptable (or impossible to change) on the grounds that life is not fair. This could be referred to as the “principle of unfairness.” This is the principle that unfairness is an unalterable part of life and hence nothing can (or should) be done about it.

While Erickson did not originate the appeal to unfairness, he seems to have helped promote it and it is routinely used as a rebuttal when people are critical of economic inequality. As such, it is typically used by those on the right against those on the left. However, principles and arguments are like sword: they can be wielded by any hand against any target—even their creators.

If the rich and the devoted defenders complain that an increase in taxes is unfair, then the defenders of the tax increase have every right to wield the appeal to unfairness. One could easily imagine a leftist version of Erickson writing in response to such boohooing: “well, these people apparently forgot that life is not fair and are demanding the government not raise their taxes so that life suddenly become fair.”

If the appeal to unfairness is a viable defense of the economic inequality that seems so beloved by its ardent defenders, then it would also seem to be a viable defense for any unfairness. This would thus presumably include the forced redistribution of wealth. That would certainly be unfair, but if unfairness is simply the way life is, then there would be no moral grounds of criticizing it.

If the appeal to unfairness does not work in the case of justifying raising the taxes on the rich (or the unfair forced redistribution of wealth), then there are two main reasons this would be the case. The first possibility is that relevant difference could be claimed between the 1% and the 99% that justifies the unfair treatment of the 99% while requiring that the 1% be treated fairly in this matter. No doubt some able defender of the 1% can present such an argument. The second possibility is that fairness is actually morally relevant for everyone. As such, if the 1% can appeal to fairness, then the 99% can also avail themselves of the same appeal. Put another way, if the rich want to talk about the fairness of their taxes, they are obligated to consider the fairness of the economic inequality that exists. Likewise, fairness also requires that the tax rate imposed on the rich not be unfair.

One side effect of the economic meltdown was the creation of the loose Occupy Wall Street movement. This had the interesting effect of getting some attention paid to economic issues, such as income disparity and class issues. This attention revealed that there is significant disparity between (to use the terminology of the occupy movement) the 1% and the 99%.

As I noted in a previous essay, there has been considerable disparity between the income increases of the various classes in the United States. The after-tax income of the top 1% in the United States increased 275% from 1979 to 2007. In contrast, the top 20% (excluding the top 1%) had a 65% increase in earnings. Those in the bottom 20% also saw an increase, but this was only 18%. As might be imagined, this has created some concern.

The disparity becomes even more extreme if one examines the income of CEOs relative to the workers. One well paid CEO, David Simon, received a pay package worth over $137 million in 2011. The national median salary is $39,312. Doing the math, that means that a person earning the media salary would need to work 3,489 years to earn what Simon received. Someone who is earning the current minimum wage of $7.25 per hour would need to work 9,095 years and 11 months to earn what Simon earned last year. Of course, Simon’s pay is above average, so it would be fairer to compare the median CEO salary with the national median salary.

The median CEO salary as of May, 2012 is $9.587 million per year. A minimum wage worker would only need to work 636 years to earn that much while a person making the national average salary would need a mere 244 to match the one year income of the average CEO. Interestingly, while many workers are facing salary cuts, the average compensation for CEOs increased by 6% from 2011 (and there had been an increase from 2010 to 2011). While there is considerable debate over how to determine the value of a person’s work, accepting that this disparity is just would require accepting that the average CEO is equivalent in productivity to 636 minimum wage workers and to 244 average workers. As anyone who has every worked knows, people do vary in productivity because of skills, talents, motivation and so on. For example, one roofer might put in a roof faster and better than another and thus she would be more productive. It is even easy to imagine one worker being equivalent to many workers in terms of productivity (and this is sometimes demonstrated when people are fired and other people are forced to do these jobs as well as their own original jobs). However it seems unlikely that CEOs are the economic equivalent of superheroes and thus can produce 244 times what an average worker can produce. As such, this would seem to indicate a clear injustice in regards to the pay of those who work for the companies with well paid CEOs.

One obvious reply is that while it would be absurd to claim that one CEO can do the work of 244 average workers, it could be argued that they actually generate value equal to (or greater than) 244 workers. After all, the value of what is produced can vary greatly. To use an obvious example, when I painted houses for money, I was paid much less than I am paid as a professor. However, this is because the service I offer as a professor has more value than that of the services I offered as a painter. In part this is due to the economics of scarcity: almost anyone can work a paintbrush, but few people can teach critical thinking or ethics at the college level. In part the difference is due to the fact that when I painted, the result was just a painted house. When I teach, the result is often a person with a college degree who goes on to get a job (or create them) and contribute to society. As such, by creating more value as a professor, I thus justly earn better pay than I did as a painter. Provided that the value I produce as a professor is proportional to the pay, then the disparity between the pay of Mike the painter and Dr. LaBossiere the professor would be just.

Turning back to the CEOs, if the average CEO is able to produce 244 times the value of the average worker, then the pay disparity would be justified. While this might strike some as unlikely, it does not seem impossible. After all, the writer Suzanne Collins has made vastly more than I ever will as a writer because her book outsell mine to some absurd degree. My books in turn outsell some other authors’ books. However, the disparity does (in general) seem fair. After all, if I could write like Collins and was able to make the right connections, then I could also be a very successful author instead of a low-end scribe. As another example, the author and speaker Sarah Palin vastly out earns me. This is because many people want to buy her books and want to hear her speak. While I do sell a few books, people generally only come to hear me speak because their grades depend on it. And sometimes not even then. As such, the income disparity between myself and Palin could be regarded as just. After all, if I could only write and speak as well as she, then I surely could earn a comparable income.

In the case of the CEOs it could be thus argued that they are like the better authors-what they produce is vastly more valuable than what other workers produce and hence they justly earn their vast incomes. As such, all a defender of disparity would need to do is make a reasonable case that CEOs do generate value proportional to their compensation and that the same is true of the average workers (and minimum wage workers).

Of course, it might be countered that the ability to create such great value depends on an economic and political system that is rife with injustice. To use an analogy, a skilled thief might “earn” much more than an unskilled thief, however it would be odd to say that the better thief has justly “earned” her wealth. The obvious counter to defend the disparity is to show that the economic and political system is just and, as such, the disparity in compensation is warranted rather than being based on exploiting an unjust system.

While scientists have only fairly recently gotten around to studying cogitative biases, philosophers have been teaching about them for centuries-typically in the form of various logical errors. However, it is good that the scientific attention to these biases is serving to attract additional attention to them.

Everyone of us is, of course, loaded down with all sorts of cognitive biases. Some scientists even claim that such biases are hard wired into the brain, thus making them part of our actual anatomy and physiology. If so, it would seem to suggest that people might be more or less biased based on the specifics of their hard-wiring. This would help explain some of the variation in people when it comes to being able to reason well.

While we all suffer from cognitive biases (and other biases) we do have the capacity to resist and even overcome such biases and reason in a more objective manner. As this takes effort and training (as well as the will to want to think critically) it is not very common for folks to try to overcome these biases. Hence, bad reasoning tends to dominate.

One standard bias is known as negativity bias. While some people are more prone to focus on the negative than others, apparently we all have an inbuilt tendency to give more weight to negative information relative to positive information. This would help to account for the fact that people tend to consider a single misdeed to outweigh a large number of good deeds.

Of course, people do also have other biases that can lead them to weigh the positive more than the negative. For example, people tend to ignore or downplay negative aspects of people, causes, and things they like and weigh the positive more heavily. This often involves embracing inconsistency by applying different standards relative to what one likes or dislikes (see, for example, how Fox News and MSNBC evaluate various political matters).

Interestingly, this bias seems to occur at neurological level. The brain actually has more neural activity when it is reacting to negative information than when reacting to positive information. Assuming these results apply generally, we are actually hard-wired for negativity.

The defense against this involves being aware of this bias and exhibiting even greater caution in assessing negative information-especially when it involves negative information about something we do not like. For example, folks who dislike the Tea Party will weigh negative information about them more heavily than positive evidence and will tend to make little effort to determine whether the evidence has been properly assessed. The same holds true for folks who dislike the Occupy Wall Street movement and its spin-offs. They will take any negative evidence as being quite significant and ignore or undervalue positive evidence.

This bias does help explain a great deal about how people see political events and assess them.